Kaola.com Product Analysis

Cross-border import e-commerce is an activity in which domestic buyers complete transactions by making payments and settling accounts through e-commerce platforms and delivering goods through cross-border logistics. As a "giant" in the cross-border e-commerce industry, how did Kaola.com manage to occupy such a high market share and develop so rapidly?

1. Industry Analysis

Definition of cross-border e-commerce:

Simply put, cross-border import e-commerce is an activity in which domestic buyers complete transactions by making payments and settling accounts through e-commerce platforms and delivering goods through cross-border logistics.

In the past, domestic consumers who wanted to buy overseas brand products generally did so through personal overseas shopping: placing an order on an overseas website, completing payment, and having the products shipped overseas via direct mail. The emergence of cross-border import e-commerce has greatly reduced the learning and usage costs for users of overseas shopping.

Differences from ordinary e-commerce:

Compared with traditional e-commerce, cross-border e-commerce has the following characteristics:

• From the user perspective, the main users of cross-border import e-commerce are the younger generation of the middle class;
• In terms of the products on the shelves, the products on the shelves of cross-border import e-commerce are mainly imported products from abroad;
• In terms of consumption habits, consumers of cross-border import e-commerce mainly purchase branded clothing, cosmetics, and maternal and infant health products;
• From a logistics perspective, cross-border import e-commerce relies on cross-border logistics and bonded warehouse systems.

At present, domestic cross-border import e-commerce platforms are developing rapidly. According to the latest cross-border import retail e-commerce industry analysis data, the market size in 2021Q2 was 129.04 billion yuan, an increase of 8.06% compared with 118.63 billion yuan in 2020Q2.

Why is the cross-border import e-commerce market rising so rapidly?

Since cross-border import e-commerce is an industry that is greatly affected by macro factors, we will use the PEST model to analyze the reasons behind it.

1. Politics

In December 2019, 13 departments including the Ministry of Finance, the National Development and Reform Commission, the Ministry of Commerce, and the General Administration of Customs jointly issued the "Announcement on Adjusting and Expanding the List of Cross-border E-commerce Retail Import Goods", adding 92 tariff items such as frozen seafood, alcohol, and electrical appliances, providing consumers with more choices.

In January 2020, six departments including the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs, the State Administration of Taxation, and the State Administration for Market Regulation jointly issued the "Notice on Expanding the Pilot Program of Cross-border E-commerce Retail Imports", which included 50 cities including Shijiazhuang and the entire island of Hainan in the pilot scope, to promote the rapid development of cross-border e-commerce across the country.

In January 2020, the General Administration of Customs allowed customs with large cross-border e-commerce export business volumes to carry out return business. In addition, according to Announcement No. 45 of the General Administration of Customs in March of the same year, users only need to send back the goods according to the merchant’s instructions for returns, without having to go to customs in person to handle it. This marks the opening of the cross-border e-commerce return channel and the problem of "difficult returns" has been further solved.

In March 2021, the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Customs, the State Administration of Taxation, and the State Administration for Market Regulation issued a notice on expanding the pilot program for cross-border e-commerce retail imports and strictly implementing regulatory requirements, further expanding the scope of the pilot program. The gradual expansion of the pilot program since the start of the pilot program in 2018 reflects the country's support for the development of cross-border e-commerce.

2. Economy

The proportion of China's middle class population in the total population has been growing steadily, and the e-commerce user group has remained at a considerable size. In the long run, the huge consumer base gives cross-border e-commerce huge development potential.

In addition, according to data from the National Bureau of Statistics, the per capita disposable income of urban residents in China was 43,834 yuan in 2020, a year-on-year increase of 3.5%. At the same time, national consumption capacity is gradually increasing. The contribution of consumption to GDP has gradually increased from 2014 to 2019. From 2016 to 2019, China's total retail sales of consumer goods increased year by year, from 3.3 trillion yuan to 4.1 trillion yuan. In 2020, affected by the epidemic, this figure fell slightly to 3.9 billion yuan. The growth of national income and the increase in consumption willingness have further promoted the development and growth of cross-border e-commerce.

3. Society and culture

With the rapid development of globalization, foreign brands are becoming more and more well-known among domestic consumers.

Nowadays, with the increase in per capita disposable income, more and more consumers are willing to pursue a higher quality of life by purchasing imported goods.

The Sanlu milk powder incident, which once frightened mothers, exposed the problem of food safety in China. After that, more and more families turned their attention to foreign milk powder brands, especially from the Netherlands, Germany and other regions. According to incomplete statistics, the main reason for purchasing overseas brands is that consumers generally believe that the quality control and inspection of overseas brands are more stringent than those of domestic brands, and that they can buy higher quality products.

In addition, for the beauty and clothing categories, due to the "promotion" of domestic and foreign celebrities and the frequent cooperation between foreign brands and domestic celebrities, the popularity of foreign brands in the country has increased exponentially in recent years. Domestic consumers' demand for overseas brands is also rising.

4. Technology

The rapid development of Internet technology also provides necessary guarantees for the cross-border import e-commerce market.

The traceability, immutability, timestamp technology, point-to-point transmission technology, and smart contract technology of blockchain will help solve cross-border logistics monitoring problems, cross-border payment problems, and cross-border e-commerce product quality traceability problems.

In the era of big data, by analyzing the data on the platform, personalized recommendations can be made to enable the platform's precise marketing.

Emerging technologies such as digital currency and cloud computing have been widely used in the payment field.

2. Competitive Product Analysis

According to the market share report on cross-border import retail e-commerce in Q2 2021 issued by iResearch, the first tier is currently Tmall Global, Kaola Global Shopping, and JD International, with a total market share of 80.5%. Since Alibaba completed the acquisition of Kaola International in 2019, we selected Kaola Global Shopping and JD International to analyze from the perspectives of development path, business model, and warehousing and logistics.

1. Kaola Shopping

1) Development History

• On January 9, 2015, NetEase's self-operated cross-border e-commerce platform "Kaola Global Shopping" was launched for public testing;
• On May 20, 2015, Kaola launched the "Love Shopping Carnival", and its overseas products expanded from maternal and child products to beauty and personal care, food and health care, household daily necessities and other categories;
• On November 11, 2015, Kaola.com participated in the “Double 11” promotion for the first time;
• On March 29, 2016, Kaola.com was officially launched, with a sales target of RMB 10 billion in 2016.
• On April 27, 2018, Kaola.com opened its first offline store, offering discounts online and offline.
• In June 2018, Kaola announced its entry into the comprehensive e-commerce market;
• On September 6, 2019, Alibaba announced a strategic partnership with NetEase. Alibaba Group acquired NetEase's cross-border e-commerce platform Kaola for US$2 billion;
• On August 21, 2020, it officially announced a strategic upgrade, focusing fully on "membership e-commerce".

2) Business Model

The main model is self-operated direct purchase.

Source of goods: Mainly B2C self-operated direct procurement, direct cooperation with overseas brands.

Category: Currently available in more than 80 countries and regions, with a total of more than 26,000 products, mainly focusing on maternal and child products, beauty and personal care, food and health, home digital products, and clothing, shoes and bags.

Authenticity guarantee: For self-operated products, global versions of imported cosmetics are identified. Based on strong supply chain capabilities, differentiated parameter comparisons are performed on different versions of mainstream cosmetics on the market, so that every cosmetic can be checked. At the same time, in collaboration with China Certification and Inspection Group Beijing Co., Ltd., each luxury bag worth more than 2,000 yuan is appraised one by one. Every product that has completed the appraisal is marked with the China Certification and Inspection Group Beijing Co., Ltd.'s authentic luxury goods logo.

Logistics: bonded area shipment, direct mail mode. The logistics systems currently cooperating with Kaola include Sinotrans, SF Express, etc. The direct mail model can ensure that users will receive the goods within 7-14 days after placing an order.

Warehousing: If it is a direct purchase model, more than 90% of overseas goods are shipped from bonded areas. Kaola.com purchases the goods in advance and stores them in bonded warehouses. After the user places an order, the goods are directly shipped from the bonded warehouse and can be received within 1-3 days. Kaola.com has a total bonded warehouse area of ​​340,000 square meters, which can meet the storage needs of more than 60 million items. It can process cross-border orders up to 300,000 items per day and more than 100 million cross-border orders a year. Bonded warehouse resources mean that we can ensure sufficient quantity and variety of goods at the same time to meet all kinds of shopping needs of customers. At the same time, Kaola.com has initially built a warehousing center in the United States, and will subsequently open international logistics warehousing centers in South Korea, Japan, Australia, Europe and other countries and regions. Overseas direct mail orders will be shipped directly from overseas warehouses to maximize logistics timeliness. At present, warehousing resources are one of Kaola's advantages.

Distribution: Kaola's current domestic distribution system relies on the Cainiao logistics system.

Users: Kaola.com targets white-collar workers aged 20-45.

After-sales service: Returns only need to be sent back to the domestic tax-inclusive warehouse without being sent abroad. This greatly facilitates users and also solves their concerns about giving up overseas shopping due to concerns about after-sales issues. At the same time, Kaola.com also provides quick refund and door-to-door pickup services. Users can complete the return without leaving home, and the payment will be credited to their account as the goods are picked up.

Business expansion: Use blockchain traceability to ensure that data cannot be tampered with. After receiving the goods, scan the code to trace the entire process of the goods from shipment to entry, making every shopping process transparent and traceable. In addition, in April 2018, Kaola opened a physical store in Hangzhou, using electronic price tags to keep the prices of goods on sale synchronized and updated in real time with the prices on the APP.

2. JD.com International

1) Development History

• On April 15, 2015, JD Global Shopping was officially launched;
• On July 30, 2018, JD Global Shopping announced that it had signed a strategic cooperation agreement with Japan's Kintetsu Department Store Group. Kintetsu Department Store's overseas flagship store is officially launched on JD Global Shopping, selling Japanese beauty and skin care, personal care, maternity and baby products, mother's zone, household products, clothing and underwear, etc.
• In November 2018, JD Global Shopping was upgraded and renamed "Haidun Global", and direct purchase centers were opened in Japan and South Korea, and will be opened in North America, Europe, Australia and New Zealand successively;
• On November 9, 2019, JD.com’s large-scale import business underwent a strategic upgrade, integrating JD.com’s cross-border products and general trade imported products, and upgrading Haitun Global to JD International.

2) Business Model

Mainly merchants settled in + self-operated direct purchase.

Source of goods: The source of goods mainly comes from brand merchants.

Category: Nearly 20,000 brands, with nearly 10 million SKUs. Covering product categories such as fashion, mother and baby, nutrition and health, personal care and beauty, 3C, home furnishings, imported food, automotive supplies, etc., from more than 70 countries and regions including the United States, Canada, South Korea, Japan, Australia, New Zealand, France, Germany, etc.

Guarantee of authenticity: Regarding the qualifications of merchants, JD International requires: Brand flagship store: first-level exclusive authorization; specialty store: first-level authorization; store-type flagship store/specialty store: full-link authorization within three levels, which must be traced back to the brand owner. The qualification requirements before a brand enters the market ensures the reliability of third-party sources of goods.

Logistics: Large international logistics such as DHL, and reduce logistics costs by packaging and mailing.

Warehousing: JD International has established multiple overseas warehouses and domestic bonded warehouses in the Netherlands, Hong Kong, Hangzhou, etc. At the same time, in September 2021, the Xiamen bonded warehouse with an area of ​​6,000 square meters was put into use. But the overall area is not as large as Koala.com.

Delivery: JD.com’s international bonded warehouse customs clearance time has been shortened to minutes, and the order customs clearance success rate exceeds 97%. Bonded stock orders in more than 100 cities across the country can be delivered on the same day or the next day.

Users: Mainly white-collar workers in first- and second-tier cities.

After-sales: "Rest assured purchase" service, users can receive a refund after applying for a refund and sending the package.

Business expansion: "Price insurance": if the price of a product drops within a period of time after the user purchases the product, the user can receive compensation for the price difference.

3. Conclusion

In terms of business model, JD International's model of direct purchase by itself + third-party brands entering the platform is better than Kaola's in terms of capital utilization. In terms of bonded storage area, Kaola.com has the largest bonded warehouse, which can ensure sufficient product categories.

In addition, Kaola Global Shopping has three other advantages over JD.com International.

1) Introducing blockchain traceability

Analysts from iMedia Research Consulting believe that in the context of consumption upgrading, authenticity guarantee is the core demand of overseas shopping consumers. Kaola.com has introduced blockchain traceability technology to track cross-border goods throughout the entire process.

2) Offline experience store

iiMedia analysts believe that offline experience stores can enhance users' trust in products.

Kaola opened its first physical store in Hangzhou in April 2018, using electronic price tags to keep the prices of goods on sale synchronized and updated in real time with the prices on the APP. There are more than a thousand products on the shelves, covering various popular consumer categories such as beauty, personal care, mother and baby, light luxury, digital home appliances, and sportswear.

The model of simultaneous offline sales of overseas shopping products has enhanced the user's physical experience, especially in terms of quality, allowing consumers who enter the store to touch the physical goods, making consumers more trusting of the quality of the goods.

3) User Experience

In terms of user experience, according to the 2019 data released by iMedia Consulting, Kaola.com is considered by consumers to be the most satisfactory e-commerce platform.

Combining the previous advantages of Kaola Global Shopping, it is not difficult to conclude that by integrating the procurement, product quality, logistics distribution, after-sales and other service aspects of the cross-border import e-commerce platform, Kaola Global Shopping can better meet the needs of consumers.

3. User Value Analysis

To explain why a product is successful, we must first understand what value the product provides to all participants.

Although Kaola's main business model is self-operation, from the perspective of the supply chain, the product participants are the following three parties: consumer users, overseas brand merchants, and the platform.

As for the logistics system, the platform itself relies on the logistics system of the parent company Alibaba, so the logistics system can be included in the platform for analysis. Therefore, we will conduct a user value analysis from the perspective of these three participants.

1. Consumers

1) Platform user groups

For Kaola.com, the current user group is white-collar workers aged 20-45, and the consumers' monthly spending is less than 1,000 yuan, and they are more sensitive to prices.

According to iiMedia Research, the priorities of overseas shopping users for products are as follows:

At the same time, when it comes to the purchasing experience of overseas shoppers, returns, exchanges and logistics issues are the most troublesome for users.

2) Solutions before the emergence of cross-border e-commerce

Compared with cross-border e-commerce, solutions before the emergence of cross-border e-commerce have more product categories to choose from, but at the same time have the following problems:

① Direct purchase from overseas websites

Placing an order on an overseas website is the most direct way to purchase the target product, but there are many problems.

A foreign currency credit card is required. Users who do not need to travel abroad or shop overseas generally do not have a foreign currency card.

You need to be familiar with English and complete the order accurately, which is difficult to complete if you are not an experienced consumer. It is very difficult to identify the product model, specifications, address, etc.

After placing an order on an overseas website, it is usually shipped directly or shipped back to the country by transshipment. In addition to paying taxes, the former also has a very slow delivery time, often taking at least 14 days. At the same time, if taxes and shipping costs are included, the price may be similar to that of domestic counters. If you choose to ship the goods back to your country via transshipment, the price will be cheaper except for tax, but you will also have to pay a certain transshipment fee, and it will take at least 14 days after the merchant ships the goods. At the same time, the transfer will also face the problem of damage or loss of items during the mailing process, which makes it difficult to protect your rights.

After-sales service is troublesome and requires international express delivery, which is not only expensive and time-consuming, but also may cause problems in communicating with customer service due to language barriers.

② Purchasing on behalf of others

Purchasing on behalf of others was previously the simplest and most widely used solution for overseas shopping, but it also had some problems.

The integrity of purchasing agents is not guaranteed. They usually exist in the form of WeChat businesses in the circle of friends, and may have problems such as selling counterfeit goods and running away.

The logistics channel for purchasing on behalf of others is also to use the forwarding company to group orders and ship back to the country, so the delivery time is at least 14 days.

After-sales issues are also unresolved, and some overseas purchases simply do not provide any after-sales service after the product is sold.

2. Overseas Brands

The seller’s demand is to maximize profits and increase revenue while reducing costs .

Reduce costs and increase efficiency: Overseas brands generally sold their products through three methods: overseas sales, opening flagship stores in China, and domestic authorized agents.

1) Overseas sales

• Overseas e-commerce: foreign e-commerce platforms such as Amazon.
• Self-built website: product official website.

Does not conform to the consumption habits of domestic users: the conversion rate is low.

The target users are mainly overseas users, and it is almost impossible to reach domestic consumers.

2) Online and offline flagship stores

Imported goods sold in stores in China are subject to import taxes and fees, and the prices are not competitive. Compared with overseas shopping channels, it is difficult to attract a large number of consumers.

3) Domestic agents

• The payment period reduces the revenue space and loses the opportunity cost of funds within the cycle;
• Sales share, revenue loss, most of the profits will be taken away by agents;
• Domestic agents can operate imported brands in a more localized manner, but at the same time they have to share profits with the agents.

3. Cross-border e-commerce platform

How to attract users and merchants: what demands of each are met.

According to the above analysis, consumers have a demand for overseas products, but at the same time, they face difficulties in selection, payment, timeliness and after-sales service when purchasing overseas products. At the same time, if they buy from purchasing agents, they have to worry about whether the products are genuine and the credibility of the purchasing agents. If they are not careful, they will lose both their money and their goods. For overseas brands, they want to develop the Chinese market but they do not have a price advantage.

Next, I will take Kaola Global Shopping as an example to analyze how cross-border e-commerce platforms "break through".

1) Satisfy user needs

① Provide a convenient shopping experience

Nowadays, Alipay and WeChat are the two major payment methods for online payments. Domestic e-commerce platforms can access two payment ports at the same time to facilitate users to pay for orders. After purchasing the goods, the platform will put the imported goods on its own platform and cooperate with local Internet e-commerce marketing to better suit the online shopping habits of domestic users.

90% of Lahaigou’s orders are shipped directly from bonded warehouses, which is its main business model. For consumers, after placing an order, the goods are directly shipped from the nearest bonded warehouse after customs clearance. The fastest delivery time is the next day, and the general delivery time is within 4 days. Compared with the traditional overseas shopping channels that often take at least half a month to deliver, this is very attractive. After being incorporated into the Alibaba Group, Alibaba's mature domestic delivery and logistics technology allows users to have a smoother shopping experience.

② Ensure product quality

90% of Kaola's products are directly sourced from the company, ensuring product quality from the source. The company officially promises that if the product is fake, it will pay ten times the price. At the same time, with the help of Alibaba's blockchain technology, product circulation can be traced, so users can buy with confidence.

③ Reduce product prices

Direct purchasing means that the platform purchases directly from brand owners, avoiding unnecessary profit-sharing links in the supply chain such as distributors, and has the right to set prices independently. At the same time, the bonded warehouses owned by Kaola can reduce or exempt taxes and fees, reduce costs, and pass on benefits to users, thereby reducing product prices.

④ Ensure after-sales experience

In the return process, the bonded warehouse assumes the role of receiving the goods, and the platform assumes the role of after-sales customer service. In the traditional overseas shopping returns process, consumers need to communicate with overseas merchants. In the past, communication channels were email (slow timeliness and low response efficiency) and long-distance calls (required high English proficiency of consumers, and also had to bear high international long-distance charges).

When consumers receive unsatisfactory products, they usually choose to sell them on second-hand platforms rather than through after-sales channels. At the same time, after-sales issues are often one of the concerns of overseas shopping consumers when placing orders.

The emergence of bonded warehouses and platforms can relieve consumers from the worries of after-sales troubles: if consumers are not satisfied with the goods after receiving them, they can communicate directly with the platform customers and then send the goods back to the bonded warehouse for return, which is convenient and quick. It usually takes no more than 2 days from the time a refund application is initiated to the time the payment is received.

⑤ Ensure the richness of products

The large area of ​​the bonded warehouse means that a large number of goods can be stockpiled at the same time. Kaola.com currently has more than 20,000 products on sale.

2) Meeting the needs of merchants

① Reduce merchant costs

Relying on the group's strong cash flow, Kaola.com has a reputation in the industry for fast payment and good payment terms.

Kaola.com is equipped with a mature pre-sales packaging and promotion team and an after-sales service team to help merchants solve the problem of "acclimatization" when entering China, saving the merchants the cost of exploring new markets.

② Increase sales

Kaola Global Shopping relies on a large area of ​​bonded warehouse resources and has a large purchasing volume.

It has high-quality media resources and brand effects, and can enhance the credibility and influence of its partner brands.

Kaola.com’s professional data statistics system can provide brand partners with comprehensive statistical data and valuable reference for their market strategies.

3) Summary

According to iMedia data, issues such as authenticity, after-sales service, price, logistics, etc. that consumers consider can be perfectly solved through the platform. At the same time, Kaola's largest bonded warehouse in the country and overseas brand cooperation resources also provide guarantees for the diversification of product categories. This is also the reason why Kaola.com has been able to develop so rapidly.

4. Commercial Value Analysis

Kaola's current core business is e-commerce. As an e-commerce platform, GMV (total transaction amount over a certain period of time) is the core indicator to measure the platform's competitiveness.

GMV = number of registered users * conversion rate * average order value

The improvement of any of the indicators such as the number of registered users, conversion rate, and average order value will have a positive impact on GMV. Below I will analyze Kaola Global Shopping from the perspective of these three indicators.

1. Number of registered users

If you want to continuously grow your receivables, a steady stream of new users is a guarantee. So how does Kaola.com attract new users? We will use the Baidu search index to judge the popularity of Kaola.com among the user group, and indirectly infer the progress of customer acquisition.

1) Payment channels

① Advertising promotion

In 2017, it sponsored "Flowers and Youth" and released a poster with an adapted copy based on the show. After the show was broadcast on April 24, 2017, the overall Baidu search index was one level higher than in 2016.

In 2018, it sponsored the third season of "Super Mom", the second season of "Running Man", and the second season of "Longing for Life", dominating the app store in the second quarter.

The overall search index of Kaola.com in 2018 has also increased compared to 2017.

② Holiday Marketing

The 2018 Double 11 "Global Shopping Carnival" exceeded the full-day sales of 2017 in 78 minutes.

2) Free channels

① Internal traffic conversion

Before being acquired by Alibaba in 2019, Kaola.com was backed by NetEase. NetEase has a huge user base covering news, music services, email business, games, etc. Through NetEase's traffic diversion, Kaola.com already had a certain user base when it was first launched.

After being acquired by Alibaba in 2019, Kaola.com was incorporated into the Alibaba system. With the support of Alibaba's e-commerce system, in addition to Alibaba's traffic, Alibaba's mature e-commerce marketing team took over Kaola.com, making user growth its primary goal and laying the foundation for subsequent user growth.

② Hot Topics

Since October 2015, CCTV has launched a special report on the “Belt and Road Initiative” titled “A Community of Shared Future in Numbers” and broadcast the first episode, “Packages from Far Away”, which went deep into the jungles of Southeast Asia and visited a latex factory in Thailand.

CCTV witnessed the entire process of production and delivery of NetEase Kaola's latex pillows. As the program was continuously broadcast on important broadcast nodes such as "Hourly News", "Midday News", and "News Broadcast", latex pillows and NetEase Kaola also quickly became popular. Judging from the Baidu search index, Kaola's popularity is growing rapidly.

In August 2019, Alibaba acquired Kaola.com, which once again made Kaola.com a hot topic.

③ Community operation and koala raising within the APP

Raising koalas has a core entrance in the APP. You can get feed by inviting friends, and you can get specific rewards when you feed the koalas to a certain level.

2. Conversion rate

For e-commerce platforms, after attracting users, guiding them to place orders and generate purchasing behavior, and converting them into paying users is valuable. E-commerce users can be roughly divided into: users with clear goals and users with unclear goals. The two user behavior path scenarios are different, so we analyze the two types of users separately

1) Users with unclear goals

Home page: can be further divided into price sensitive type (9.9 free shipping) and price insensitive type (big brand rankings).

For users with unclear goals, their main path is to browse products, browse around, add to favorites, add to shopping carts, etc. The process before the product details page is a shopping guide process, which serves users with unclear goals.

Shopping guide process: Attract users through different activities, and further subdivide them into price-sensitive types (9.9 free shipping) and price-insensitive types (big brand rankings).

① Discounted order

For new users, Koala offers full-value coupons to stimulate users to place orders by satisfying their desire for bargains. Similarly, for the hard-core subsidies, boutique supermarkets, and Koala live broadcast windows on the homepage, keywords such as "low price", "13 pieces for 99 yuan", and "30 yuan off for live broadcast orders" are used to attract users to buy products and increase their willingness to pay.

② Stimulate orders through content

Paishu TV and Like Community (grayscale testing).

• Pashu TV: Aims to build an overseas lifestyle platform, video content, live broadcast and other formats.
• Like Community: A UGC community for grass-roots experts, with a core entrance in the APP.

According to the operational experience of the Tmall team, the content-based nature of products and the community-based nature of content will be a major reality in the industry, and the grass-planting economy is the most typical form of content-based nature. Most of the products purchased overseas are fresh and unfamiliar, and users’ purchasing decisions are naturally related to content (planting grass), and more UGC will be output in the future.

At the same time, live streaming is also a way of content output. Different from other e-commerce platforms, Kaola.com's Tree Climbing TV turns its attention to content about overseas lifestyles.

2) Users with clear goals

Clearly define the user path: search for products - enter product details page - add to shopping cart - pay

① Search page

When you type the essence in the search box, it will automatically associate the essences of different types, uses, and brands, giving more considerate guidance to the user's fuzzy search and guiding the user to make a choice, which will make hesitant users more motivated to click in to view product details.

After clicking on the desired associative answer, the display page is also cleverly designed. The red envelope benefits are clearly displayed at the top, and you can receive them conveniently and quickly by clicking on them. After receiving the red envelope, consumers’ willingness to consume will be enhanced because they do not want to miss the discount amount in the red envelope, which satisfies their loss aversion psychology (if they do not use the red envelope, they will lose the discount, and users hate losses more than using it).

In addition, the price of the product is displayed in red bold instead of gray original price to show the discounted price, attracting consumers to click on the product details page at a cheaper price. In addition, there are promotional words such as "special price", "tax included", "instant discount when placing an order", and "discount for purchases over a certain amount" to attract consumers to click to view product details.

② Product details page

Path guidance and product details pages are user consumption experience pages, and the quality of their design will have a direct impact on user purchasing behavior. How to help users make quick decisions to add items to the shopping cart and make payments directly is the core of this page design.

The Lancome Little Black Bottle on the left is at a special discount price exclusively for new customers (original price 390). There is only a buy now button, but no add to cart button. It directly gives users a path instead of letting them choose whether to add to cart or buy directly. At the same time, in terms of button color design, the Buy Now button is more abrupt and can attract users to click, thereby guiding the user's path in disguise.

③ Establish consumer protection

As analyzed before, authenticity and after-sales service quality are the two factors that overseas shoppers are most concerned about. Therefore, promising authenticity and after-sales service on the product details page builds users' trust and sense of security, allowing users to purchase with confidence and without any worries (authority principle).

④ Create a sense of consumption scene

Through product details pictures, instructions for use pictures, effect comparison pictures, etc., restore the user's offline usage scenarios, highlight the product effects, and make users feel that this is the product they want to buy.

⑤ Demonstrate cost-effectiveness

Cost-effectiveness means that everyone has the consumption principle of obtaining the maximum benefit at the lowest cost. Through price comparison, actual price reduction, buy two get one free and other promotional activities, the cost-effective atmosphere is highlighted, making users feel that it is cost-effective to buy during the price reduction period, and they will lose money if they do not buy (shortage principle).

⑥ Create a popular and word-of-mouth atmosphere

Through user text and picture reviews, on the one hand, we can build user trust and eliminate their purchasing concerns; on the other hand, we can create a strong consumer popularity atmosphere (environmental influence) and enhance users' willingness to buy.
⑦ Demonstrate cost-effectiveness

There will usually be a recommendation entrance after the product details page. The recommended products on the product details page are generally products with the same price and high similarity to the current product.

When users are not satisfied with the current product they are browsing, provide them with multiple other options. If there is no recommendation option, the user's path is as follows:

Browse the product details page - unsatisfied with the product - exit to the main page

After adding the recommendation module, the user's path is as follows:

Browse the product details page - Unsatisfied with the product - Browse the recommendation page - Select another product to enter the details page

This increases the likelihood of users paying, which in turn increases conversion rates.

Recommendation module: It is placed after the details. When users are still not satisfied after reading the product details, they are given new options. If there is no recommendation module, users will exit the product page. Different from the shopping cart (related recommendations) logic, this is a similar recommendation.

⑧ Shopping cart

The shopping cart page covers information on item prices, taxes, promotions, membership activities, etc., using price advantages to attract customers to pay.

3. Average order value

For e-commerce platforms, there are two ways to increase the average order value: increasing the total amount of a single order and increasing the frequency of shopping.

1) Increase the total amount of a single order

As for increasing the total amount of a single order, it usually happens after the customer has finished shopping and is ready to check out the goods. The platform needs to allow the customer to continue to order other items, so we should analyze it from the shopping cart link.

① Coupon

Use discount coupons to attract users to continue ordering other items to complete the order, so that users can pay more with satisfaction.

② Recommended products

Through algorithm recommendations, for example, if you recently browsed and added makeup brushes, the system will recommend beauty eggs; if you added facial essence, the system will recommend eye essence, etc.

The recommendations are not products of the same type, but products that may be used in makeup and skin care scenarios. After being recommended to users, the users may happen to have this need and may continue to place an order.

③ Increase shopping frequency

After the purchase success page, there will be personalized recommendations, lottery coupons (not applicable to this order), etc. For e-commerce, increasing shopping frequency is also to increase customers' willingness to buy.

④ Member

Since being acquired by Alibaba, Kaola has focused on the e-commerce membership system. Members have the characteristics of high initial customer spending, high activity and high repurchase rate: members’ annual customer spending is 7.3 times that of non-members, monthly activity is 2.4 times that of non-members, and the annual number of orders is 4 times that of non-members.

After being acquired by Alibaba, Kaola has been deepening its membership model and bringing the concept of 1% selection to its full potential. Kaola.com is Alibaba's first membership e-commerce platform, and will build China's first membership e-commerce platform through the black card membership model.

Previously, on the product details page and the shopping cart page, there was a clear sign at the top saying you could save money by becoming a member.

Through the coupon rebate system, members can make users feel that becoming a member is not only a money-saving behavior, but also attract users by providing better after-sales service.

After becoming a member, Koala's coupon return system will return coupons once when the card is opened, and then regularly return coupons every month and on birthdays to improve user stickiness and increase user willingness to consume after receiving the coupons (coupons are purchased by paying for membership, which makes users more willing to use them than free coupons).

⑤ Reward coupons after purchase

After the payment is completed, Koala will return coupons for other categories, such as 1-30 RMB for skin care products over 30 RMB, etc., which are very powerful coupons to stimulate users to place orders for other categories of goods again, thereby increasing the frequency of shopping.

⑥ Points lottery ticket

The built-in points and coupon system of Kaola.com can convert the user's "activity level" on the APP into corresponding rewards, such as coupons. After receiving the coupons, it can stimulate users to place orders for corresponding products, thereby increasing the frequency of shopping.

5. Product iteration

All core versions of Kaola.com from V1.0.0 to V4.31.0 are summarized as follows:

1. Start-up phase

According to the above figure, Kaola.com is divided into three stages for analysis based on different functional iteration directions:

During this stage, Kaola.com mainly completed the process of migration from PC to mobile, but at the same time it was also optimizing the user experience on mobile devices. For example, the function of grabbing new products upon their arrival is a convenient function that cannot be matched by the PC side, and it is intended to cultivate users' habit of using mobile terminals.

As shown in the table above, the author believes that the period from the launch of version V1.0.0 in March 2015 to the launch of version V3.2.0 in September 2016 was the start-up phase of Kaola.com. Judging from the above iterative content, Kaola.com mainly improves the basic functions of the e-commerce platform in order to meet and verify user needs and polish products.

At the same time, in order to provide users with a good experience, Kaola.com has made the following improvements:

1) Before purchasing

Simplified classification, product recommendations, real-time search, horizontal navigation channels, product detail page optimization, etc. are all designed to facilitate users to browse products and guide users to click on products. If they encounter problems during the browsing process, they can communicate with online customer service, which is convenient and quick.

2) Purchasing

Convenient shopping on one page, combined payment, multiple payment methods, simplified order process, etc. are designed to facilitate users to place orders and pay and improve user payment efficiency.

3) After purchase

After purchasing a product, users may have various needs, such as a sudden change of plans and no longer wanting the product, or a sudden and urgent need. Through the self-service order cancellation function, the operation can be completed immediately without waiting for customer service intervention. After completing the purchase, users who want to share or hope to get discounts by sharing can express their opinions through functions such as sharing good things and commenting.

At the same time, some other small functions such as invoicing, order tracking, no need to queue for after-sales service, tax details at the checkout counter, gifts, etc. give users a good experience during use.

Generally speaking, during this stage, Kaola.com has been continuously improving and polishing the user experience, laying a good foundation for the later growth stage.

2. Growth stage

From the V3.5.0 version in January 2017 to the V3.15.1 version in May 2018, Kaola.com entered the growth stage. At this stage, through the updates of Kaola Global Shopping, we can see that Kaola Global Shopping’s main strategy at that time was to attract new users and increase their willingness to buy.

From the V3.5.0 version in January 2017 to the V3.15.1 version in May 2018, Kaola.com entered the growth stage.

1) Attract new customers

Version V3.5.0 is the first time that Koala.com has launched the new member red envelope function, which can be seen as a sign of Koala.com's transition from the startup stage to the growth stage. Kaola.com expands new user channels through functions such as red envelopes for new users and group buying.

It can be seen from the download data that after Kaola released version V3.5.0, the download volume has increased significantly.

2) User purchase intention

The membership system was introduced in version V3.6.0. It has been analyzed before that the membership function is to improve user stickiness, purchase frequency, etc.

Join the community module and attract users with unclear goals to purchase and place orders through UCG content production.

The prepayment function is introduced. In the shopping experience, the prepayment will divide an order into two payments. When the user first locks in a desired product at nearly 1/5 of the price of the product, the low price will create an illusion for the user and make the user temporarily ignore the original price of the product.

During the final payment stage, since part of the amount has already been paid and the prepayment deposit can be inflated into huge discounts, users will eventually be satisfied and place an order.

Adding the installment payment function can divide a large order into several installments, and can also give users the illusion that "it is not expensive", thus attracting users to place orders.

The newly added warranty replacement insurance service gives users a sense of security when purchasing, and the ultimate goal is to attract orders.

3. Mature stage

At this stage, Koala began to try to tilt its focus to the membership system, such as black card discounts, rebate benefits, exclusive customer service, etc., to create the "exclusive" characteristics of black card to attract users to join members.

From the V4.0.0 version of the product in June 2018 to the V4.31.0 version in July 2020, it is the mature stage of Koala Ocean Shopping.

At the same time, it is also constantly improving the module to improve users' purchasing intentions, such as like community, tree climbing TV, live broadcast, shopping cart price reduction notification and other functions. This stage is mainly marketing activities for users who have registered Koala Haizhuang.

4. Conclusion

Overall, the iterative function intention and strategy of Koala Haigou’s version is very clear. In the startup stage, it focuses on polishing the user needs of basic e-commerce and "doing core functions"; in the growth stage, it focuses on attracting new products and user conversions; in the mature stage, it focuses on the overall experience of users to improve the satisfaction of users' shopping.

VI. Product structure

For the convenience of analysis, the author talks about the use of four dimensions of user scenario demand functions to split:

Because the users on the mobile terminal are consumers, we divide them into the following three scenarios according to the consumer shopping process: before, during and after purchase.

1. Before purchasing

As analyzed in the fourth part before, we can divide consumers of e-commerce platforms into users with unclear goals and clear goals to analyze their needs.

1) Users with unclear goals

For users who are not clear about their goals, they need to know what kind of products they can buy on the platform first, and at the same time they also need to develop the desire to buy before they can proceed to the next step.

Therefore, their needs for such users:

• What is the platform selling
• Is there anything I happen to be able to use, but I can't think of buying it now
• Is there any product that is currently cost-effective for me to stock up on it? Although it is not available at present, it may be available in the future.
• What guarantees does the platform allow me to place an order with peace of mind?

In response to the above needs, Koala Haigou can quickly develop a sense of Koala Haigou through the homepage classification: a platform for selling multiple categories of imported goods from overseas.

Then when users are wandering around the platform, they buy TA module to plant good items from users through live video recordings, which can remind users that they may also have this need, stimulating users to click on the product details page to place orders.

In addition, the large-scale content on the homepage is to attract users to click in with words such as promotions and low-price goodies. In the end, they can "take advantage" and attract users to buy some products with great discounts. Although they cannot use it now, they will place orders because the price is too affordable.

After clicking on the home page and clicking on the product details page, you can see the authentic product guarantee, which will allow users to choose the koala platform more securely.

2) Clear target users

The user needs with clear goals are very simple, which means that you can quickly find the products you want to buy. Therefore, the search module can meet the current needs well, and the evaluation module can quickly help users decide whether to choose the current product.

2. Purchasing

It is very simple to buy users’ needs, mainly to save money and worry.

1) Save money

Before users add items to the cart, the main core is to find the items they want to buy, and they do not consider too much current products that can participate in certain activities to achieve more affordable prices. Therefore, users will have the need to make the price "cheaper" after adding it to the shopping cart.

In the shopping cart, full activities, free shipping activities, coupon entrances, etc. can provide users with a variety of discount options, and can also stimulate users to purchase other products.

In addition, Koala's exclusive black card membership system can provide users with more discounts, allowing users to spend a small amount of money and save a lot of money, greatly meeting users' "cheap" needs.

2) worry-free

When the user adds the shopping cart to prepare for payment, the address module pre-filled the commonly used address (default address mark, and also has address tags such as home, company, etc.), and can directly click on the operation to select and complete it. At the same time, you can choose to issue an invoice before payment, which is convenient for public procurement. For users who have installment needs, they can also connect to Huabei installment through the payment module.

Overall, it means letting customers stay in the shopping cart for the shortest time and preparing all the options for users.

3. After purchase

Generally, after-sales needs are related to consumers after purchase. We divide the purchase into three stages: before delivery, during delivery, and after arrival.

1) Before delivery

Before shipment, users may find that they have bought the current product incorrectly, or have a more suitable order plan and need to cancel the order. At this time, the order can be cancelled immediately through the self-service customer service module, saving user time.

Before delivery, users may be anxious to receive the product as soon as possible, and they can contact the platform through the customer service module to urge shipment.

2) Delivery

In item delivery, users may arrange their own matters based on the arrival date of the purchased goods, etc., and can check the logistics progress through the order module.

3) After arrival

After the items arrive, users find that the items are damaged, the quality and text are inconsistent, and they can perform after-sales return and replacement repairs through the customer service module.

After using a piece of item, I found it very useful (difficult to use). If you want to write down your evaluation of the product, you can write down your evaluation through the evaluation function of the order management module for reference by other users.

4. Conclusion

To sum up, Koala Haigou V4.59.1 can meet users' needs well in the entire shopping process. Many detailed needs can be met in place, and can also create unexpected but practical needs for users.

7. Product operation

We will use the AARRR model to conduct operational analysis of Koala Haizhuang

1. User Acquisition (A)

1) Internal drainage

• December 5, 2017: Fantasy Westward Journey players have a certain probability of triggering additional reward questions when participating in the imperial examination. Answer the additional reward questions correctly and get a 15 yuan coupon provided by Koala Haigou
• October 30, 2018: You can get a full year of NetEase Yanxuan Super Member + NetEase Cloud Music Vinyl VIP + NetEase Email Member + Koala Haizhuang Black Card Member
• December 5, 2018: Purchase the Fantasy Westward Journey App Store recharge card through Koala Haizhuang and enjoy a 10% discount
• August 21, 2019: You can purchase 3 months NetEase Cloud Music VIP + 10 yuan Koala Sea Shopping No Threshold Coupons

2) Advertising traffic

• From 2017 to 2018, sponsored variety shows such as "Where Are We Going, Daddy", "Flowers and Boys", "Longing Life", "Mom Is Superman", "Running Man", "Star Detective" and other variety shows
• Subway advertising

3) Strategic cooperation

• In January 2016, Koala Haigou and @cosme officially signed a direct procurement cooperation agreement
• In October 2017, Koala Haigou signed a strategic cooperation agreement with the American brand Garden of Life.
• In the first quarter of 2018, Koala Haigo signed strategic cooperation agreements with dozens of world-renowned brands, including one of the largest pharmaceutical groups in Europe, Ferrer Group, Australia's 60-year-old skin care brand Ego, Denmark's first home furnishing brand Ossendal, etc.
• In May 2018, Koala Haigou reached a strategic cooperation with Nivea's parent company, Germany's Byersdorf Group
• In September 2020, Koala Haigou reached a strategic cooperation with Hong Kong Sasa Group
• Koala Haizhuang Unilever reached strategic cooperation in May 2021

2. User Activation (A)

After the user downloads and registers the app, he needs to activate the user to open the app, thereby improving the daily and monthly active users of the app.

Koala Haigou has launched a full coupon rebate event for newcomers, a large coupon event for newcomers, and other incentives for newcomers to stimulate consumption of new users.

At the same time, Koala Haizhuang launched a koala care entrance in the bottom bar, and promoted users to frequently open the app by feeding koala points every day, points can be exchanged for coupons, deductions and other activities.

The daily check-in and receiving koala bean activities will have generous rewards on the third and seventh days to promote user activity. Koala beans can be deducted cash, 1 koala bean = 0.1 yuan.

3. Improve retention (R)

Koala Haigou focuses on the black card membership system, displaying the discounts of black card through multiple scenarios in the app, promoting users to purchase black card members, and improving user retention activities such as regular coupons for members, such as membership rebates: next-day retention and 7-day retention.

4. Get profit (R)

Reference 4.3.

5. Recommended Spread (R)

• The version of Koala Haizhuang iterated before has the function of sharing good things and earning commissions by friends placing orders;
• Invite friends to help raise koalas;
• Multi-platform sharing: WeChat, QQ, Sina Weibo, DingTalk, poster, QR code and other sharing methods meet the different sharing needs of users.

8. Future Outlook and Optimization

1. Future Outlook

Through the above analysis, we understand the reason why Koala Haizhuang quickly occupied the market. Let’s analyze how Koala Haizhuang will plan in the future through the SWOT model:

Through the above analysis, we can see that if Koala Haigou wants to continue to grow, it needs to do the following:

• Solve disadvantages
• Seize the opportunity
• Development advantages
• Avoid threats

First of all, you must make your own blood. For Koala Ocean Shopping, it is about reducing costs and increasing efficiency. Balancing heavy asset operation costs and corporate profits is a difficult problem facing Koala Ocean Shopping. At present, Koala Haigou has been incorporated into the Alibaba system. Alibaba's middle and backend can provide Koala with mature e-commerce operation services, logistics system, cloud technology, etc., to reduce operation and distribution costs. At the same time, koala must also make efficient use of its bonded warehouse. Although the large area of ​​bonded warehouses has advantages, it will become a burden if they cannot be used efficiently. At the same time, you can try to increase the entry of merchants and rent part of the bonded warehouse to the settled merchants to use it, reducing the cost burden of the business model.

Secondly, efforts should be made to minimize the counterfeit rate, and at the same time, we should cooperate with after-sales follow-up investigation to investigate the causes of problems and the collection of customer demands, so as to improve user satisfaction and reputation.

After Koala Haizhuang merged into Alibaba Group, Koala Haizhuang has completed its scale, reaching the second largest market share (it cannot surpass Tmall International). Alibaba's e-commerce team took over Koala Haigou and began to focus on the membership system, launching a black card membership of 270 yuan per year.

At the current node, Koala's market share exceeds 20%, and it is a strategic correct to regard retained users as key service objects. Can you consider joining differentiated members, 270, or monthly membership, quarterly membership and other options. First cultivate the user's habit of paying members, enjoy membership benefits at a low cost, and then promote black card annual membership.

2. Optimization suggestions

1) Business model

As stated in 8.1, explore the best ratio of merchant settlement mode and direct procurement mode. Koala currently accounts for only 10%. You can try to rent out the right to use bonded warehouses to merchants, increase the proportion of merchant settlements and reduce the current operating costs.

2) Core Functions

As a core function, buying TA has an independent entrance. After clicking in, users can only slide down to find the products they are interested in. The operation space is too small, which is a process of passively receiving information. The entire process relies on the koala algorithm to recommend the products they are interested in to users. If a user wants to know a product with a purpose, he can only get it by "luck". After the video and live broadcast content is rich, you can try to add basic functions such as classification and search (currently only have categories in a certain live broadcast room) to allow users to better understand product details and usage scenario simulation.

Author: Yuanda

Source: Yuanda